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Thinking locally acting globally: that's not an easy concept for a lot of multinational companies, but an Oracle executive argues that the old ways of deferring to local practices need to be abandoned in favor of global standardization. (Global Business).

A surprising number of companies that operate around the world have yet to realize the benefits of globalization. Instead of achieving the economy of scale of a global enterprise, many multinational corporations still function as a loose confederation of U.S. and foreign business interests, each with its own reporting systems, business practices and IT solutions.

At a time when corporate accountability is under intense scrutiny, financial officers often must certify the performance of diversified holdings around the world without standardized processes or integrated information systems.

Moreover, with scores of data silos around the world, companies operate with huge information blind spots. It can take weeks, even months, to collect, reconcile, translate and analyze a company's regional and overall performance. As one CFO ruefully puts it, "What I get every fiscal quarter is a global headache."

The situation is an outgrowth of outdated technology and practices. For decades, the prevailing wisdom for companies expanding oversea was: "Think global, act local." This market theory was based on acculturation: the practice of customizing product and services for regional consumption in accordance with the local language(s), currency, culture and regulatory climate. Not surprisingly, localization encouraged each country of operation to develop its own customized IT solution.

There is a difference between operating around the globe and being global. Globalization refers to the process of streamlining and standardizing communications, business functions and management practices throughout the global organization. While the global offices remain sensitive to cultural and compliance issues in the markets they serve, the organization functions as an integrated, global enterprise. This model, reflecting the new economic realities of a 24/7 global marketplace, can be summarized as "think local, act global."

Globalization touches all businesses, regardless of size. A small company or specialty manufacturer might not serve an international audience, but the organization can improve its supply-side economics by finding alternate sources of product and services in other markets. For large corporations, the benefits are far-reaching -- literally spanning the globe.

Change the Culture

Among companies around the world, there is near-unanimous agreement that globalization is a strategic priority, yet uncertainty exists over how to enact such comprehensive change. Corporate decision-makers tend to see globalization primarily as a technology challenge, but experience shows the largest impediment to globalization is cultural.

The "think global, act local" mindset is firmly rooted in corporate culture. Within most large, geographically dispersed organizations, the overseas offices and subsidiaries continue to operate with a great deal of autonomy. Steeped in the local business customs and laws, the in-country managers are regarded as regional experts whose decisions regarding that market are largely deferred to. They typically have a proprietary IT system to handle all aspects of their business, and purchase goods and services from local vendors and suppliers.

Asking foreign offices to cede control over any operations and make the sweeping changes necessary to move to a global model will create resistance. Therefore, the first prerequisite in the globalization process is to get the buy-in and support of C-level management. Change of this scale and magnitude cannot be requested, it must be mandated. To ensure universal adoption, the orders must come from the very top -- globalization cannot be implemented in an ad hoc fashion.

Change the Business Processes

Globalization requires common business practices and processes across the enterprise. The challenge is to reengineer processes to be globally efficient, yet locally accountable. A multinational company still must meet all in-country requirements set by foreign governments, as well as honor the business traditions, etiquette and customs that underpin successful and long-term relationships. The aim, therefore, is to establish shared services and global practices, which simultaneously have the flexibility and robustness to meet local compliance criteria.

For example, in both Southern Europe and Japan, negotiations are sealed with a document similar to a promissory note, basically a pledge of good faith and intention. Therefore, any global system serving these markets must offer local versions of this protocol document.

In implementing a global system, build it as broadly as possible. In other words, accommodate and support diversification. Metaphorically speaking, the system should operate like a master light panel where everyone is using the same energy source (the data) and amperage (processes), but users can switch the lights on or off as needed.

Determining the local subset of required functionality for each nation's operation is not for the fainthearted. Expect in-country offices to defend their entire system as essential. In reality, it will be a mix of real and manufactured needs. Some processes will comply with local statutes and customs; others will reflect the idiosyncratic preferences of management, past and present. For instance, some regional managers want top-line financial summaries, while others prefer detailed reports with lots of market numbers and breakouts. Chances are high the local reporting system will mirror the in-country manager's personal style, or those of one or more predecessors.

One strategy to get around this problem is to put one person in charge of one global business process, such as customer relationship management or finances or human resources. Chosen for their experience and skills, the managers can take ownership of process design and implementation worldwide, and make local judgment calls. For instance, a collections expert will have the final say over the content of invoices (as opposed to product or sales managers), because that department's task is to make sure the company gets paid.

In addition to supporting market diversification, the global system must support the company's full range of business activities. An important lesson to remember is that "dummying down" the system will defeat the purpose of globalization. If local markets cannot access the information and forms they need, they will be forced to create parallel systems. Never compromise functionality in an effort to simplify and streamline global processes.

Change the Technology

As noted, most corporate policy-makers overstate the technological challenges of globalization and underrate the cultural ones. The technology to support globalization exists today. The Internet provides a low-cost global communications network that even the smallest specialty parts supplier can access with a standard Web browser, serving as a common platform to standardize, automate and streamline business processes, enterprise-wide, in real-time.

When formulating a globalization strategy, the first step is to conduct a worldwide technology audit to understand the deployment of resources, and what compatibility and integration issues exist. A technology group also should evaluate e-business solutions to identify what features and functions are available, and at what cost.

Among the issues to examine in detail, is how "global" the solutions are. Some e-business software vendors may claim to offer global solutions, when they actually improvise foreign market solutions by partnering with local entities. These customized software solutions might address local compliance needs, but they also will introduce future compatibility and maintenance/upgrade problems.

As globalization takes hold, the users accessing company resources will widen to include vendors, customers and partners. Therefore, companies must adopt an outward-facing collaborative culture. While early collaboration solutions, like Electronic Data Interchange (EDT), were prohibitively expensive for mid-to-small size companies, the Internet opens up the supply chain to anyone with a standard browser. Moreover, through role-based Web portals, companies can control how much visibility partners, customers and suppliers have into their operation.

Once a common infrastructure and software solution is in place, companies and their suppliers can realize a fast return on investment in terms of shorter product cycles, greater inventory optimization and real-time market intelligence and decision-making.

Globalization = Economy of Scale

As companies adopt e-business strategies, the world literally shrinks. With a universal communications platform and common user interface, marshalling and deploying corporate resources worldwide becomes less an issue of geography than cost performance.

By operating from one unified Web-enabled infrastructure and a centralized global database, a company can better utilize and deploy its resources and personnel to meet worldwide demand. With the creation of virtual teams, companies can juggle more projects simultaneously. Reducing the need for consultants to travel increases their value to the company.

Globalization is important to businesses of all sizes. Removing regional silos of process and data from any organization can alleviate information blind spots and enable management to more effectively analyze and evaluate both division and overall business performance. Streamlining and standardizing communications, business functions and management practices to be consistent throughout the global organization, while local offices remain sensitive to cultural and compliance issues in their markets, maximizes an organization's worldwide market presence.

Driving the change to act global yet think local is not easy, but economies of scale and operational efficiencies built into a standardized, global system make its benefits clear: As revenues grow, cost reduction, information sharing and margins improve. Local business specifications and advantages can continue while management achieves global visibility and real-time information about performance. It is an investment that keeps producing dividends.

RELATED ARTICLE: Global Software: Key Features

To have a truly global solution, look for e-business software solutions with the following features and tool sets:

Unicode support. Unicode is a universal encoded character set that allows you to store information from any language in a central database. It defines codes for characters used in every major language written today, and also provides support for more than 94,000 characters for the world's alphabets, ideograph sets and symbol collections (punctuation marks, diacritics, mathematical symbols, technical symbols, musical symbols, etc.).

Using Unicode, a company can deploy a single system and single data center, reducing IT operations and allowing users to have access to complete global information. It also supports corporate Web sites that serve customers from all over the world.

Data consolidation. Globalization is best served when the enterprise uses the same consistent data model worldwide, enabling a single definition of customers, suppliers, partners, employees and business events to be used across the enterprise.

Automatic conversion of external documents into the receiver's language. In a global marketplace, language remains a barrier. With this system feature, external documents are prepared in the language, currency and custom of one nation of operation, and automatically translated into the language, currency and custom of receiving destination.

Interoperability among all systems. No company can afford to upgrade all its IT systems at once, so ensuring that the new global finance system you are installing will work with other legacy systems your company already has is a must.

Global support. In implementing global technology solutions, you want to ensure that operations around the world can receive technical support locally.

Steve Miranda is Vice President, Applications Development, for Oracle Corp. He can be reached at 650.506.2731 or
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Author:Miranda, Steve
Publication:Financial Executive
Geographic Code:1USA
Date:Mar 1, 2003
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